BUSINESSDESK: Australia & New Zealand Banking Group lifted full-year profit in New Zealand by 11% as it benefited from fatter margins and smaller provisions for bad debts.

New Zealand underlying profit, which excludes some non-core items, rose to $957 million in the 12 months ended September 30 from $863 million, the Melbourne-based lender says in a statement. The underlying net interest margin widened to 2.62% from 2.52% a year earlier.

The bank is under way with the biggest change on the New Zealand lending scene since ANZ bought National Bank from Lloyds TSB in 2003 for $5.7 billion. It will scrap the National Bank brand, shrinking the group's network of branches and cutting out duplication ahead of relinquishing the rights to use the Lloyds black horse logo in 2014.

Non-core items for the parent include $59 million for the New Zealand simplification programme. The phase-out of National Bank was costed at $100 million when it was announced in September.

The parent reported a 5% gain in operating income to $A17.7 million for the full year, with statutory profit up 6% to $A5.66 billion and underlying earnings up 6% to $6 billion.

The bank is expanding in the region through what it calls organic growth in its "super regional strategy" while adjusting to what it calls "the lower growth environment where tight management of costs and capital are increasingly important".

In New Zealand, the credit environment "continues to improve" and the lender's simplification plan is delivering productivity gains and market share growth in key segments.

Lending volumes rose 3%, with growth most evident in the second half, with demand for home loans in Auckland and a pickup in demand from small businesses. Deposits rose 9%.

ANZ increased gross loans and advances by more than any of its main banking rivals in the three months to June 30, increasing gross loans and advances by 1.26% in the quarter, according to the KOPMG Financial Institutions Performance Survey.

That was bettered only by minnow The Cooperative Bank, the former PSIS.

ANZ shares last traded at $A25.60 on the ASX, valuing the lender at $A69.9 billion, and have surged by 25% this year. The stock is rated a "hold" based on a Reuters survey of 21 analysts, with a price target of $A25.90.

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